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Federal court considers the new patent entitlement provisions for the first time

In a recent interlocutory injunction proceeding before his Honour Justice Rares in the Federal Court of Australia,[1] the new patent entitlement provisions of the Patents Act 1990 (Cth), which were introduced on 15 April 2013, were considered, it is understood, for the first time.

The amendments provide that a patent is not invalid merely because it was granted to a person who is not entitled to it, and also require that the Court must not make an order revoking a patent unless it is satisfied that, in all the circumstances, it would be just and equitable to do so. Depending on the interpretation of these provisions, allegations of lack of entitlement may be less often used in future patent invalidity cases.

In the proceeding before Justice Rares, Reckitt Benckiser Healthcare (UK) Limited and Reckitt Benckiser (Australia) Pty Limited sought to restrain GlaxoSmithKline Australia Limited from infringing Reckitt Benckiser’s Patent relating to a liquid dispensing apparatus, comprising a bottle, a flat nosed syringe, and a bottle neck liner in which the syringe is inserted to allow take up of the liquid when the bottle is inverted.[2] GSK brought a cross-claim against Reckitt Benckiser challenging the validity of Reckitt Benckiser’s Patent on various bases including lack entitlement.

Preliminary Background

The Patent was filed in 2003, and named as inventors two employees of Boots Healthcare International, which was subsequently acquired by the Reckitt Benckiser group of companies.

Contrary to what the register shows, GSK alleged that three employees or officers of the company that originally manufactured and supplied the liquid dispensing apparatus to Boots, Hubert De Backer NV, were the true inventors and that Reckitt Benckiser was therefore not entitled to the Patent.

The Entitlement Provisions

Section 15 of the Patents provides that a patent may only be granted to:

the inventor;

a person who, on the grant of the patent, would be entitled to have the patent assigned to them;

a person who derives title from the inventor or entitled person; or

the legal representative of a deceased entitled person.

Further, section 138(3) of the Patents Act provides that the court may revoke the patent, wholly or so far as it relates to a claim, if the patentee is not entitled to the patent.

The correct application of the provisions has been the subject of debate.

Some Entitlement Cases

For example, in University of Western Australia v Gray,[3] the University of Western Australia claimed that inventions developed by Dr Gray during his course of employment at UWA belonged to UWA due to an implied term of Dr Gray’s contract with UWA. The Court found that Dr Gray, despite being employed by UWA, was entitled to the patent. This decision was the subject of a 400 page judgment by Justice French at first instance, a 100 page judgment by the Full Court, and an application for special leave to the High Court (which was refused).

In University Of British Columbia v Conor Medsystems Inc,[4] Conor alleged that patents granted jointly to UBC and Angiotech (the second appellant) should be revoked if it could be shown that UBC and Angiotech’s claim to entitlement stemmed from some, but not all of the actual inventors of the invention. At first instance Finkelstein J found that UBC was not entitled to the patent and the patent should be revoked. UBC then appealed to the Full Federal Court which set aside Finkelstein J’s orders but ordered that the matter be remitted back to Finkelstein J as there was insufficient evidence before the Full Federal Court to answer the preliminary question of whether the alleged facts support revocation of the patent. The Full Federal Court suggested that UBC may be able to establish some act or conduct whereby it could demonstrate entitlement. The matter was later settled.

In Davies Shephard Pty Ltd v Stack,[5] Davies alleged that Stack was not entitled to a patent developed by Stack and Grieves as the application was filed in the name of Stack alone. The Court ultimately found that Stack was not entitled to the patent as no relationship existed between Stack and Grieves whereby Stack alone was entitled to the patent. The Full Court came to this conclusion despite Stack leading evidence that Stack and Grieves intended to assign the patent to a company jointly owned and controlled by them.

The Amendments to the Entitlement Provisions

Legislators have recognised the complications arising from the provisions and have stated:

Patent ownership issues can be complicated, and it can be unclear, even to the parties involved, who has entitlement to particular patent claims[6] ...

It is often difficult to determine the persons correctly entitled to the patent and errors in entitlement are often no more than an honest mistake by the inventors and applicants. Revocation of the patent is often an unnecessarily harsh outcome.[7]

In light of these complexities, on 15 April 2013, as part of amendments under the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth), a new section 138(4) was added to the Patents Act. Section 138(4) provides that:

(4) A court must not make an order under subsection (3) on the ground that the patentee is not entitled to the patent unless the court is satisfied that, in all the circumstances, it is just and equitable to do so.

Additionally, a new section 22A was added to the Patents Act and provides that:

A patent is not invalid merely because:

the patent, or a share in the patent, was granted to a person who was not entitled to it; or

the patent, or a share in the patent, was not granted to a person who was entitled to it.

The Agreement between Boots and HDB

While GSK alleged that Reckitt Benckiser was not entitled to the Patent in suit, Justice Rares was provided with an agreement entered into by Boots and HDB in 2006. The recitals to this agreement, together with evidence lead by Reckitt Benckiser at the interlocutory hearing, demonstrated that, at least for interlocutory purposes, Boots had initiated a project in the late 1990s to develop a liquid dispensing apparatus to be used with Nurofen for Children, specifically a dosing system that used a flat nosed syringe and bottle neck insert combination, as research conducted by Boots had indicated that children associated traditional syringes with injections.

As part of the project, Boots had identified HDB as a potential supplier of the dispensing apparatus, as it had experience with similar products. Boots determined that the existing HDB bottle inserts were not suitable for use with the Nurofen for Children product, and proposed various modifications to the design, over a period of approximately 24 months. After the design of the modified dosing system had been finalised, Boots applied for a patent in relation to the invention, and in accordance with the Agreement, Boots amended the Patent claims so as to capture only the specific inventions made by the Boots employees who were the named inventors of the Patent.

In the Agreement, HDB explicitly acknowledged that Boots was the owner of the invention the subject of the Patent on the basis that Boots (by its employees) had created the invention. HDB also acknowledged that it would not contest the ownership, validity, inventorship or any other issues relating to the Patent.

In addition to the Agreement, evidence was lead that the named inventors had signed declarations that they were the original, first and joint inventors of the subject matter claimed in the relevant PCT application number, from which the Patent was derived, as well as “Inventor’s Acknowledgment” documents acknowledging Boots’ rights in the invention.

Consideration of the New Provisions by Rares J

After agreeing with counsel for both parties that sections 22A and 138(4) of the Patents Act applied in these proceedings,[8] Justice Rares considered the application of the two sections to the facts. In doing so, his Honour referred to the Agreement, noting that HDB and Reckitt Benckiser made their intentions in relation to the Patent very clear.

Relevantly, his Honour stated that:

Even if Glaxo were able to establish, as I do not think it has at a prima facie level, that there was a sufficient doubt as to the assertions made by Ms Dallison and Mr Harrison that they were the inventors, s 22A of the Act provides that a patent is not invalid merely because it was granted to a person who was not entitled to it. Moreover, s 138(4) of the Act provides that the Court cannot make an order that a patent be revoked on the ground that patentee is not entitled to it unless the Court is satisfied in all the circumstances that it is just and equitable to do so. That requirement must be construed in the context of the circumstances here.[9]

After referring to the Agreement, his Honour noted that HDB effectively treated Boots as entitled to the Patent:

In my opinion, the likelihood is that if the matter of entitlement were tried on the present material, the Court would be very likely to find that HDB had effectively treated Boots as either the person entitled to the benefit of the invention, or an assignee of it, even though the Boots agreement itself is not a formal assignment.[10]

It was also relevant that GSK was not a party to the Agreement:

There can be little doubt, on the present evidence, that justice and equity would regard the position that the two parties with an interest in the invention had arrived at in their agreement in 2006 should not be disturbed at the suit of a third party (Glaxo). Glaxo’s only interest is to displace the property right that, if nothing else, the Boots agreement appears to have conferred on Boots and now Reckitt, as its assignee.[11]

In rejecting GSK’s entitlement case on an interim basis and finding it unjust and unconscionable to ignore the agreement between the two parties,[12] his Honour further said that one must have regard to public interest when considering sections 22A and 138(4):

But if this was patentable – and assuming it is because the entitlement issue is just about who is entitled to assert the right – I mean, you’re basically saying what is effectively under a different guise an assignment should be ignored. And that strikes me as being something with the Act as now amended doesn’t really suggest would be in the public interest to allow that to be litigated and run and succeed.[13]

Conclusion

Although Justice Rares’ findings are only interlocutory, the extent to which his Honour took into account the recently amended entitlement provisions is interesting.

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